The economic reports that will determine when the Fed will raise rates

The Federal Reserve policy makers made only tiny changes to their July policy statement, released Wednesday in Washington — notably, they didn’t offer clear hints of whether or not they’ll raise the main interest rate at their September 16-17 meeting. That fits with their mantra of data-dependence: They say they’ll increase their target rate, known as the federal funds rate, when the US economy gives signs that it’s ready. It also means Federal Reserve-watchers must hone in on key reports to catch the signals that this week’s release didn’t offer. Here are the crucial data points. US GDPWhen it’s coming: July 30, revision August 27 What to watch for: Fed officials are looking for a sign that output in the world’s largest economy recovered after a 0.2 per cent slump in the first quarter. The median economist in a Bloomberg survey is looking for a 2.5 per cent gain in the second quarter. “It would have to be a significant surprise to change things,” said Stephen Stanley, chief economist Amherst Pierpont Securities in Stamford, Connecticut, and a former Fed researcher who is looking for a September rate increase. “If we get something along the lines of the consensus or better, we’re fine.” InflationWhen it’s coming: The personal consumption expenditures price index, the Fed’s preferred inflation gauge, comes August 3 and August 28. The consumer price index, a different inflation measure produced by the Bureau of Labor Statistics, comes August 19 and September 16. What to watch for: “The next critical issue is: Are we going to get some inflation numbers that signal a stronger economy?” said John Silvia, chief economist at Wells Fargo in Charlotte, North Carolina. Policy makers are hoping inflation will show signs that it’ll move up toward their 2 per cent goal, which it has persistently undershot, with the year-over-year PCE deflator reaching just 0.2 per cent in May. For insight into how the Fed is interpreting inflation data, we’ll have to wait for the July FOMC minutes, a more detailed description of what happened at this week’s meeting that will be released August 19. Officials made few changes to the inflation language Wednesday, aside from dropping the June phrase? energy prices appear to have stabilised.” WagesWhen it’s coming:The Employment Cost Index comes out July 31, Average Hourly Earnings data come August 7 and September 4. What to watch for: In some ways, a wage pickup is the Holy Grail of labour market data: It’s what people are looking for. Sustained gains signal that the labour market is healed and tightening, giving workers bargaining power, and can be a sign of coming inflation, though those ties are more tenuous. The Bloomberg consensus is looking for a 0.6 per cent pickup in the Employment Cost Index for the second quarter, which comes out later this week and measures changes in both wages and benefits. That would come after a 0.7 per cent gain at the start of the year. EmploymentWhen it’s coming: August 7 and September 4 What to watch for: The Fed painted a sunny picture of a healing job market and added that just “some” further improvement is needed to make a funds rate increase appropriate.

“Much as I love employment Friday and watching those numbers, I don’t think that’s the critical variable at this point,” Sylvia said. “I think employment is a done deal. They’re talking about things being solid. I think it’s time to move on.” Policy makers will have plenty of time to communicate how they’re thinking about the numbers through speeches between now and September. For now, they’ve left the door wide open.


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